Refer to the Figure Below to Answer the Following Questions

question 78

Multiple Choice

Refer to the figure below to answer the following questions.
Figure 9.3.1
-In Figure 9.3.1, suppose the demand for dollars temporarily decreases so that the demand curve shifts from D₀ to D₂.To maintain the target exchange rate, the Bank of Canada

• A)sells dollars.
• B)buys dollars.
• C)must violate both interest rate parity and purchasing power parity.
• D)must lower the target exchange rate.
• E)must raise the target exchange rate.

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